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OPEC's Crude Is Too Sour for This Oil-Market Upstart

  • High-sulfur crude not suitable for its refineries: Dongming
  • Chinese refiner gets more than 50% of oil from Africa, Latam

OPEC’s biggest producers are playing second fiddle to smaller suppliers in a coveted corner of the oil market.

Crude with a lot of sulfur, including supply from Saudi Arabia and Iran, is too sour to be processed easily at its plants, said Zhang Liucheng, director and vice-president at Shandong Dongming Petrochemical Group, the biggest among China’s private refineries. Most of the independent companies, which have been courted by sellers since they were granted access into international oil markets last year, are instead seeking ‘sweeter’ cargoes with lower sulfur content, he said.

Such crudes are typically pumped in regions such as Africa, Latin America and Russia, meaning producers there could gain the most from purchases by the private refineries, which now account for a fifth of demand in the world’s second-biggest oil consumer. The processors, known as teapots, have contributed to China’s record imports this year and helped revive global benchmark prices. Shandong Dongming says it’s open to buying cargoes from state oil companies or international trading houses.

“We did take a look at crude from Saudi Arabia but found its quality to be a bit too sulfurous and not economic to refine,” Zhang said in an interview in Singapore, adding that Iranian cargoes are also not suitable. “We have no preference when it comes to purchasing oil from state-owned producers and trading houses. State-owned sellers can provide secure supplies, while international traders can give us more flexibility in terms of prompt...